Bank Officials Under U.S. Criminal Investigation
by THE ASSOCIATED PRESS

text size A A A November 17, 2010
The federal government has opened criminal investigations into approximately 50 executives and directors of U.S. banks that have collapsed during the financial crisis.

Deputy Inspector General Fred Gibson said Wednesday the inspector general's office at the Federal Deposit Insurance Corp. has been probing the role of the executives in bank failures around the country.

The criminal investigations are separate from civil lawsuits approved by the FDIC's board against some 80 bank executives, employees and directors. The FDIC is seeking to recoup about $2 billion in bank losses that the regulator says were the result of negligence or misconduct by executives or directors.

The FDIC has shut down or seized 311 banks since January 2008 at a cost of around $77 billion. The criminal probes were reported earlier by The Wall Street Journal.

Bank executives could face prison terms if convicted of criminal charges. But the burden of proof is higher than in civil cases and usually involves showing deliberate intent to commit fraud or other violations.

The inspector general's office is working with the FBI in the investigations as is customary in such cases. Gibson didn't identify any of the banks or individuals involved.

Most of the individuals targeted in the civil actions also haven't been named. FDIC attorneys have been in settlement talks with the executives.

One exception came in July when the FDIC sued four former executives of failed IndyMac Bank. The regulator is seeking $300 million in damages against the four former officials of the bank's Homebuilder Division: Scott Van Dellen, Richard Koon, Kenneth Shellem and William Rothman. The collapse of California-based IndyMac in July 2008 was one of the biggest bank failures in U.S. history. It cost the deposit insurance fund an estimated $12.7 billion.

The FDIC alleges in the suit that the former executives negligently approved loans to homebuilders that had a slim chance of being repaid. The four have denied the allegations.

Most of the banks involved failed in 2008 or later, Gibson said in a telephone interview. Such cases typically take two to four years from investigation to prosecution by the Justice Department to resolution, he said.